Non-bank lenders vs Standard bank loans

How do you choose a small business loan? The first step is deciding who to go with. Here’s an easy guide to the pros and cons of traditional lenders and Non-Bank lenders.

First of all, small business financing is usually a good option for business owners:

• With a clearly defined plan of expansion or a clearly-defined time-frame
• Who is able make the payments
• You are aware of the terms and terms associated with the loan. Your broker or adviser is here to help you with any concerns.

If you’re looking to invest in inventory, brand new technology or equipment as well as additional staff, training and renovations or even new premises that will take your enterprise to the next step You may want to weigh up the advantages and disadvantages of taking out traditional bank loans versus taking on a Non-Bank lender.

Online or bank?

Bank loans

The brand reputation of a long-established bank can be considered solid or safe in the sense of security – in New Zealand banks are registered with the Reserve Bank of New Zealand and fall under the same regulations.

The application for bank loans could be long and complicated and will require a certain amount of paperwork which some small business owners might be limited by time constraints to meet. The process could be quicker if the bank has digital ability to access your personal financial data - while banks aren’t generally recognized for their data-savvy approach to small-business loans, their capabilities are becoming better.

As is the case with all types of lending the chance of lower interest rates may need to be considered along with characteristics of loan products to choose the most appropriate kind of loan. The lender and the loan Traditional bank loans are likely to have strict criteria and cumbersome applications processes and may not be flexible.

Cash flow is so crucial to the survival of many small enterprises, the gap between a loan today which could be used to fund the sale of stock in the next day, and a loan in the next month after the seasonal demand is over can be make or break.

Non-bank or online business loans

When a solid credit history and solid security are usually necessary for obtaining a bank loan, Non-Bank lenders may be more flexible in their approach. They can also tend to offer more flexibility when it comes to structuring loans.

Non-Bank lenders are often more digitally innovative than banks, so applications can sometimes be completed and approved swiftly, and the funds can be made available by the next working day, following approval.

It is still necessary to provide details of what the loan is intended for the business’s name, type of business and history, as well being able to provide the security required for larger loans however, because a comprehensive business plan and lengthy applications aren’t required in every deal, the process could be quicker.

Heads up: relationships, red flags and payments

If you’ve established a solid relationship with a bank’s management or another lender, you could contact them regarding the process of applying for loans and obtaining approval. Your broker may help you navigate the various requirements of lenders.

Although many of the newer non-bank lenders work exclusively online, certain lenders can provide a dedicated loan advisor to help you through the loan application process and to really understand your business needs.

If you’re thinking about Non-Bank lenders take a look at independent reviews. If an offer seems too promising to be true for instance, getting pre-approval prior to applying or the lender seems extremely aggressive in their approach you should talk to a broker or adviser and looking into the matter before committing.

If you’re borrowing from a non-bank or bank lender, it is important to understand the terms and whether you’re able to make the obligations. The most important thing to consider is creating a set of rules for yourself when deciding whether you should use business loans to aid your business’s growth, to manage seasonal ups and downs and fluctuations in cash flow, to benefit from opportunities to purchase stock in massive quantities, or to pay for day-today operations and costs.